London & Regional Gets Noteholder Backing to Restructure £256m Securitised Loan

London & Regional has won support for the restructuring proposals it put forward for its £256m LoRDS 2 CMBS.
An ad-hoc group made up of the majority of each class of notes, advised by Brookland Partners, has okayed the plan, whilst 88% of the Class A Notes (by value); the same percentage of Class Bs; and 67% of Class Cs, have entered into or intend to enter into lock-up agreements with L&R even though part of the plan to remove the liquidity facility could lead to the notes’ rating being withdrawn.
Lock-up gives noteholders a fee for early approval. All noteholders will be asked to vote on the proposals on 20 December.
Essentially, the borrower wants to extend the senior loan by three years to October 2016, and will in return pay noteholders an increased margin ranging from a 3% increase per annum for the Class As; to a 4.25% uplift for the Bs; to a 5.3% rise for the Cs. Noteholders will receive pay back on a sequential basis.
L&R will also provide extra risk cover by paying for an interest rate cap agreement whereby the cap provider is required to make payments to the borrower should LIBOR payable on the senior loan exceed 4% per annum.
An extension will allow L&R time to enhance the value of the portfolio, partly by continuing its refurbishment of Epworth House, Bewlay House and Cotton House, and to deleverage its debt by selling properties. The portfolio had fallen in value from £443.8m at the time the securitisation was issued in July 2006 to £305.2m in August 2013, net of three properties sold at original valuation.
The proposals make provision for a £29m capex loan which will be made by the property company and used to fund the refurbishment works, with 8% interest payable following repayment of the senior loan.
It has designed the proposals in order to hang on to two of the biggest properties with most value within the securitisation – the Hilton-operated Green Park Hotel and the Trafalgar Square Hotel. These cannot be sold or refinanced unless the net proceeds of a sale, or repayment in the case of a refinancing, is higher than 120% of the value of the respective property.
A further feature of the proposals is that the £128m B loan lender will lose many of its rights under the intercreditor agreement in order to enhance its subordination to the senior loan. It will no longer have the ability to enforce, or the right to approve any property sale.
Asset management company APAM will be appointed as property adviser to the noteholders.

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